The skin consists of the outer layer, epidermis and the underlying layer of the dermis. The dermis induces and supports the hair follicles, glands, nerves, and blood vessels in the skin. People with Focal Dermal Hypoplasia, Aplasia Cutis Congenita, large wounds, and severe burns lack normal dermis and skin function. Despite the importance of the dermis, very little is known about the embryonic origins and fate selection of dermis in different parts of the mammalian embryo. The dermis can originate from the somites, lateral plate mesoderm, and the cranial neural crest. In this proposal, we will focus on the mechanisms of emergence and Wnt signaling function in craniofacial dermal lineage. With the recent advent of elegant genetic tools, it is only now possible to combine spatial and temporal mutational analysis of signaling pathways with cell lineage studies to determine how the dermal cell identity is induced and track the movements of dermal progenitors in the context of the embryo. We have identified a critical role for beta-catenin, the central transducer of Wnt signaling, in the development of craniofacial dermis in the mouse embryo. We are uniquely poised to address the specific aims of this proposal. In Aim1, we will characterize the emergence of the craniofacial dermal lineage with a combination of recently developed genetic lineage marking tools. In Aim2, we will define the mechanism of Wnt signaling function in craniofacial dermal lineage by analyzing tissue-specific conditional loss and gain of beta-catenin function mutants. In Aim3, we test the hypothesis that Dermol, the earliest dermal progenitor marker, is the critical mediator of Wnt signaling in promoting the dermal genetic program. The results from this study will provide the first comprehensive view of how the craniofacial dermis develops in the mouse embryo. Identifying the signal that promotes dermal cell fate in various progenitor tissues will enable us to guide mesenchymal stem cell differentiation along the dermal pathway and manufacture dermis that is capable of inducing hair and glands of the skin, accelerating wound healing, and restoring functional skin. The study of underlying mechanisms of dermal induction and development in different parts of the body offers an excellent model for understanding congenital dermal defects, acquired skin damage, and normal skin patterning.